Some Hard Lessons For Startups To Learn

Paul Graham has written a great article on this subject, a must read. I am reproducing my favorite excerpts:"I was talking recently to a startup founder about whether it might be good to add a social component to their software. He said he didn't think so, because the whole social thing was tapped out. Really? So in a hundred years the only social networking sites will be the Facebook, MySpace, Flickr, and Del.icio.us? Not likely.The reason we don't see the opportunities all around us is that we adjust to however things are, and assume that's how things have to be. For example, it would seem crazy to most people to try to make a better search engine than Google. Surely that field, at least, is tapped out. Really? In a hundred years-- or even twenty-- are people still going to search for information using something like the current Google? Even Google probably doesn't think that.In particular, I don't think there's any limit to the number of startups. Sometimes you hear people saying "All these guys starting startups now are going to be disappointed. How many little startups are Google and Yahoo going to buy, after all?" That sounds cleverly skeptical, but I can prove it's mistaken ..."
http://www.paulgraham.com/startuplessons.html

How to Calculate Start Up Costs for a New Business?

The very first issue that comes up with a startup is to find out the intial investmment/funding required. Though the best way is to start this with a detailed business plan in hand. But here is the list of things I have done to come to the estimated cost of initial setup & the additional capital to keep the business running till you get the operational break even:

1. Writedown each & everything you would need & when. Try to capture the cost of each of the item. Keep 10-20% extra to keep the buffer for any missed out item or higher cost. To determine the costs of the equipment your organization needs, look for online distributors or commercial wholesalers available locally.

2. Determine business start up costs for your area. This can include a business registration charges, insurance for your business, getting PAN numbers, TAN Numbers etc.

3. Determine the office space cost and for other assets required. Make sure you include all the brokerage charges, advance rentals etc.

4. Determine the cost of hiring employees.

5. Think about advertising and marketing expenses that can get your business out there. Newspaper ads, flyers, phone book advertisements, or online advertisements are examples. Business Cards and referral cards can be helpful as well.

6. Determine all the ongoing expenses required to meet monthly expenses of running the operations.

7. Ongoing costs can include Salaries, utilities charges like Electricity & telephone bills, rent, supplies required for your operations, marketing & advertising etc. Ongoing expenses should be considered for good enough period atleast till the period you get operational breakeven & beyond.

8. Must keep atleast +20% buffer while calculating your expenses. More the buffer better prepared you are.